Viernes de Transporte con Leonardo Basso “Everybody loves density”

“Everybody loves density”

Expone: Leonardo J. Basso - Universidad de Chile & Instituto Sistemas Complejos de Ingeniería (ISCI), with Raúl Pezoa (UDP) and Hugo E. Silva (PUC).

• Viernes 17 de abril 2026
• 13:40 hrs
• Modalidad híbrida
• Inscríbete aquí

Abstract

Everybody loves density. Economists like to model and quantify the many benefits of urban density. It boosts productivity and innovation, improves access to good and services, reduces travel needs and externalities, encourages more energy-efficient buildings and forms of transport, and allows broader sharing of scarce amenities. Other social scientists share this fondness for density and would like to see it increase in cities everywhere, including the densest ones”. Yet, Urban sprawl and suburbanization has been intensifying for decades. For example, a survey of 282 European cities across Europe show that in the period 1996-2006, urbanized areas increased by 18.4%, while population density fell by 9.4%. In the US the  average density of urbanized areas decreased from 6,160 persons per square mile in 1920 to 2,589 in 1990. Indeed, urban sprawl, its causes and possible remedies are common in the urban economics and planning debate: quite often the literature studies possible (transportation) policies that could be implemented to lead to more compact cities in order to reduce externalities such as congestion and pollution and reap agglomeration benefits. Yet the simple question of when is a city too dense or too extense does not seem to have a clear answer. In this paper we examine this question through a simple monocentric model where there is an absentee landlord whose land rents may be partially taxed, and the measure of welfare is resident’s utility. We show that in the presence of positive residential agglomeration economies and full taxation of land rents, as is always assumed in the literature, the equilibrium city is indeed too extense, and policies leading to a mora compact city would be welfare improving. However, when land rents are not totally captured by the planner –and actual values range from 0 to 30%-- a de-densification force arises, which counteracts agglomeration externalities. Simulation results show that this de-densification force dominates for any land rent capture below 90%. As a result, in practice, even when positive agglomeration economies are present, cities seem to be too compact and dense in equilibrium, such that welfare would increase if the city was more extense. This has policy implications for other externalities as well. For example, in the presence of congestion, using a Pigouvian toll equal to the marginal external cost is worse than leaving the city unpriced.